Knowledge that Transforms

Past customer spending in a category is generally a positive signal of future customer spending. Analyses of historical data at two retailers demonstrate that there exist “canary categories” for which the reverse is true. Purchases in these categories are a signal that customers are less likely to return to that retailer. The authors propose an explanation for the existence of canary categories and then develop a stylized model that illustrates four contributing factors: the probability that a customer finds their favorite brand, customers’ willingness to substitute brands, the cost and attractiveness of visiting other stores, and expectations about future brand availability. The analysis uses both field data and experiments to investigate these factors. The findings suggest that canary categories exist (at least in part) because store assortments are not completely adjusted to local preferences. An implication is that canary categories are endogenous to each retailer; the same category may be a canary category at one retailer and a destination category at a competing retailer.

Product consumption is an important yet understudied aspect of marketing. Over-the-counter medicines present a unique consumption context because consumers are expected to follow product label instructions. For acetaminophen, a widely consumed over-the-counter drug, the authors study which consumers tend to deviate from the label instructions, why they do so, and the interventions that are most promising to mitigate such deviations. They develop a dynamic structural model of consumption that enables them to investigate the probability of different types of label deviations (e.g., >4 g per day) and drivers of such behaviors. Label deviations are infrequent “tail area” behaviors, and the model uncovers them well. The analysis is based on a unique online consumption diary in which consumers select from two classes of acetaminophen products (single ingredient or a combination of ingredients) to treat their pain or non-pain-related symptoms . Consumers have a higher probability of taking >4 g of acetaminophen when they have multiple symptoms, and a variety of observable factors explain the individual propensity to deviate from the label. The authors propose two interventions—a new label instruction and consumer education—to mitigate the observed label deviations and assess the expected impact of each.

In realizing that consumers regularly straddle the work–life interface, some companies position their products according to their ability to address work and life needs together, then communicate this offering to consumers. Whether using a work–life positioning strategy is effective remains unclear , however. If this strategy signals work–life enrichment, it should increase consumers’ interest, but only if the product demands few resources from consumers. If the product instead demands substantial resources, a work–life positioning might inadvertently trigger perceptions of work–life conflict and lower consumers’ interest. To test these predictions, the authors partnered with three businesses to advertise their products, which impose varying resource demands, on social media using content that highlights the work–life interface or not. Analyses of ad click data support the predictions: Work–life ads are less effective than single-domain (work or life) ads if the advertising involves resource-demanding products, but they are more effective if it pertains to resource-undemanding products. Furthermore, the effects are stronger among consumer segments that experience more work–life conflict in general. With this initial application of work–life theory to a marketing context, this article offers relevant insights for both research and practice.

This research proposes a simple, new technique to obtain truthful answers to sensitive, categorical questions. The paired response technique (PRT) asks participants to merely report the sum of the answers to two paired questions, one baseline and one sensitive, with the answers to each question known only to the participants. The technique then statistically infers the prevalence of the sensitive characteristic and its potential drivers from the association of the baseline question with other questions in the survey. Monte Carlo simulations demonstrate the performance of the PRT under varying conditions. A representative survey (n = 4,649) in the Netherlands about legal and illegal purchases of prescription drugs to enhance sexual performance reveals that 17.4% of the target population has purchased medication to enhance sexual performance at least once. In contrast, in a control group surveyed with direct questioning, only 5.1% admit having done so. The great majority of these individuals opt to purchase illegally. Two further empirical applications, respectively, in the United States and the United Kingdom, show that the PRT reduces cognitive and affective costs of survey participation compared with a state-of-the-art randomized response technique for categorical questions.

This article examines the role of the sunk cost effect as a commitment device in mitigating the self-control problem and analyzes its implications for optimal contract design. Consumers may anticipate the effect ex ante and strategically use it to mitigate their self-control problems. Although the sunk cost effect may lead to a loss of consumption flexibility in the event of high consumption costs, it can serve as a commitment device to enforce self-control. A firm's optimal policy should balance the consumer's demand for flexibility in consumption with the demand for commitment. Under a simple fixed-fee contract, sunk costs have a nonmonotonic effect on profits for investment goods; that is, profits first decrease and then increase with the sunk cost effect. The firm can use a two-part tariff or a refundable fixed-fee contract to mitigate the sunk cost effect. This article also compares the implications of alternative psychological mechanisms underlying the sunk cost effect (regret-based vs. memory-cue-based) for contract design.

Intertemporal choices represent one of the most prevalent and fundamental trade-offs in consumer decision making. While prior research on intertemporal choices has focused on choices for oneself, intertemporal choices often involve one individual choosing on behalf of another. How do intertemporal choices made for another person differ from otherwise identical choices made for oneself? This research introduces a self–other decision model that distinguishes reaction utility (derived from interpersonal feedback) from vicarious utility (derived from imagining the recipient's experience). The authors tested model-derived hypotheses in 13 experiments (N = 4,799) involving decisions between peers. Consistent with the proposed role of reaction utility in the model, they find that intertemporal choices made for others are typically more “impatient” than choices for oneself. Moreover, this “agent's impatience” is attenuated when contextual and individual differences weaken the anticipation of interpersonal feedback. Together, the theoretical model and experimental results highlight the rewarding value of interpersonal feedback in self–other decision making, shedding new light on interpersonal consumer choices.

Firms like Uber, Amazon, and TripAdvisor have popularized the rating of people, goods, and services. These entities receive scores (e.g., through online reviews) in a variety of presentation formats: incremental (a raw score per episode; e.g., 5–5–2), cumulative (updated average scores; e.g., 5–5–4), or a combination thereof. This article focuses on prevalent situations in which a score deviates from prior scores and examines how the presentation format of the scores impacts decision makers’ (e.g., consumers, managers) evaluations of the entity scored. Across a wide variety of settings, nine experiments document that when a generally well-performing (poorly performing) entity suddenly receives a negative (positive) score, overall performance will be perceived as less negative (positive) when shown in a cumulative format compared with an incremental or combined format. This effect appears to be stronger when the deviating episode is more representative (e.g., due to higher recency or internal attribution). The authors also find evidence for their proposed explanation: a cumulative format distorts individuals’ perceptions of the underlying raw score of the deviating episode. These findings imply that presenting scores in alternative formats may affect marketing outcomes (e.g., customer churn, product choice, technology adoption, new product success, and user engagement on peer-to-peer platforms).

Analysis of actual transactions in a grocery store shows that households enrolled in the U.S. government's Supplemental Nutritional Assistance Program (SNAP) purchase more unhealthy hedonic food, compared with households that do not receive SNAP benefits. SNAP households purchased more unhealthy hedonic food regardless of whether they used government funds or cash to pay for their purchases. Three follow-up simulated grocery shopping studies were designed to understand the mechanisms underlying this food consumption pattern by SNAP households. SNAP households, compared with households that do not receive SNAP benefits, reported stronger food craving. Stronger food craving was associated with lower unhealthiness perception of hedonic food. Overall, the results suggest that food cravings can reduce perceptions of unhealthiness and thus increase unhealthy food purchases. Interventions that reduce the effect of food cravings on shopping decisions might reduce unhealthy consumption.

This article examines the impact of business-to-business (B2B) buying groups on buyer–supplier relationships. The authors outline two distinct initiatives—monitoring and community building—through which buying groups govern buyer–supplier exchange and impact supplier performance toward buyers. Two boundary conditions are identified for the performance efficacy of the buying group's governance efforts: the buyer's own governance of the supplier and the dependence relations among the focal parties. Analyses using two-wave primary data collected from the U.S. health care sector and replications using secondary outcomes indicate support for the proposed framework. The authors conduct a conjoint experiment to further enhance the generalizability of the findings and report that a buying group's monitoring of suppliers enhances supplier performance both by itself and with increasing supplier monitoring by the buyer firm. Further, the supplier's dependence on the buying group and the buyer's dependence on the supplier both sharpen the efficacy of the buying group's monitoring program. However, the performance effects of community building are weakened as the buyer–supplier relationship becomes stronger and as the buyer grows more dependent on the supplier. The authors thus uncover novel interplays between B2B buying groups and B2B dyads and document their consequences for firm performance.